This week there is continuing unrest across the world, as political and social changes are affecting world politics. Make UK highlights that manufacturing is still suffering since exiting the EU and there are key issues with barriers to trade. The World Economic Forum states this week that while no nation has emerged unscathed from the pandemic, countries with advanced digital economies and digital skills, robust social safety nets and previous experience in dealing with epidemics have better managed the impact of the pandemic on their economies and citizens.
Economy
- Despite unprecedented levels of business support from Government during the pandemic, regional business leaders are stressing that the support is not enough to help businesses to stay afloat and are calling for further, urgent aid from Government in order to avoid further job losses.
- Birmingham Crane Survey 2021. A key finding is that development activity continues across Birmingham city centre with great anticipation as we all look forward to hosting the Commonwealth Games in July next year. Beyond that, the arrival of HS2 and the first brand new intercity terminus station built in Britain for over 100 years, means Birmingham is continuing to attract national and international interest.
- The NPI’s new report on economic justice was published this week by the Barrow Cadbury Trust. The report highlights that over the last decade, economic disparities between the stronger and weaker parts of the WMCA have grown rather than shrunk. Even though the WMCA is doing well does not necessarily mean that all parts of it are. The Black Country needs special attention.
- The West Midlands economy had the largest contraction of all the UK regions in 2020 Q2, registering a GDP decline of 21.0%. For the UK the decline was 18.8% in 2020 Q2. Quarter on Quarter a year earlier (2019 Q2 to 2020 Q2) GDP analysis shows for the West Midlands region there was a contraction of 24.7% – the highest decline seen across all twelve regions. Over the same period, for the UK there was a decline of 20.7%. Overall, there was a fall in GDP for all four sectors in 2020 Q2, when compared with the previous quarter for the West Midlands region, with agriculture falling by 1.9%, services by 19.0%, production by 24.3% and construction by 38.8%.
- Youth claimants have improved slightly in December but WMCA remains the 3rd highest combined authority on youth claimant measures, with 42,220 or 8.6% of the young population claiming, nearly double the amount in March 2020.
- For all claimants, the WMCA has the highest proportion at 6.3% of the population and 209k above the UK average at 4.8%.
- The region continues to have positive business activity with a number rising to 54.2 in December (a positive index number is over 50, under 50 and the economy is contracting). The upturn is linked to the end of the second lockdown and more companies reopening. The region also continues to have a positive future business activity index at 73.6. In the West Midlands, 63.1% of businesses responding to the ONS survey had high confidence in surviving over the next three months. 26.3% had moderate confidence in survival, 3.6% had low confidence.
- Apprenticeship vacancies rose in December to 2,290, with the WMCA area having the highest number of any combined authority, demonstrating the opportunities still available in the region. Job postings are also highest and rising at 179k.
- Furloughed workers rose in November and December to 221k. There are slightly more men than women furloughed, and those aged 25 to 34 years still account for the highest proportion of the total (23%) but the distribution by age has become more even, with the 35-44 year olds at 19% and 45 to 54 at 18%. Larger companies have the highest value of furlough claims at £1.6bn and a third of claims are in the accommodation and food services followed by just under a 5th in wholesale and retail.
- 3% of West Midlands businesses expected redundancies to occur between the next two weeks and one month and 69.2% expected redundancies in the next one to three months.
- The parliamentary constituencies in the WMCA (3 LEP) area with the highest furlough rate on 31st December was Birmingham, Ladywood at 15.2% (8,100 furloughed of 53,300 eligible). This was followed by Stratford-on-Avon at 14.8% (6,400 furloughed of the 43,300 eligible) and also Birmingham Hodge Hill at 14.3% (6,100 furloughed of the 42,800 eligible).
- Across the WMCA (3 LEP) area, 171,900 people were eligible for Self Employment Income Support Scheme (SEISS) 3. There were 103,500 claims made to 31st December, with a total value of nearly £275m with an average claim value of £2,800. The take-up rate was 60.2%, above the UK average of 57.1%. The industry with the highest take-up rate was transportation and storage at 75.1% (23,700 eligible, 17,800 claims).
- Overall footfall in the UK was at 34% when compared to the same week in 2020. Overall footfall in the UK decreased by 1 percentage from the previous week and the city centre data locally still remains very low.
- 2% of West Midlands businesses had applied for the Local Restrictions Support Grant – England and 81.5% have received). 1.1% of West Midlands businesses had applied for a grant from the Lockdown Business Fund – Wales (6.0% have received). 3.6% of West Midlands businesses have received a grant from the Strategic Framework.
- 4% of responding West Midlands businesses reported they had more staff working from home due to COVID-19. 9.7% of responding West Midlands businesses reported homeworking had increased productivity, 53.5% reported productivity had stayed the same and 19.4% reported productivity had decreased. 25.3% of responding businesses in the West Midlands intended to use increased homeworking as a permanent business model going forward.
- This week has seen a healthy number of referrals to support businesses proactively rather than just supporting Covid survival. Start-Ups have featured highly along with grant referrals for Green Business initiatives and Capital and Tech Investment projects. Assistance has also been sought for property searches, training and recruitment.
- Quarantining Policy – Urgent clarity is required on new quarantine rules for airports, stressed by Greater Birmingham Chamber of Commerce.
- Tech start-ups and scaleups in the West Midlands raised a record £390m in funding in 2020, almost three times more than 2019’s previous record of £132m. Gymshark, the Solihull-based fitness e-commerce platform which raised £200m in growth equity funding to become the region’s second-ever unicorn – defined as a private company valued at $1bn or more.
- The number of investment deals completed in the Midlands last year fell to its lowest level since 2014, according to new figures, while their values slumped by almost 60 per cent. Experian has said transaction numbers dropped from 989 to 825 in 2020, a fall of 17 per cent. The value of the deals dropped by 57 per cent from £15.3bn to £6.6bn, the lowest level over the last decade.
Health and wellbeing
- There was a total of 1,352 deaths registered across the WMCA (3 LEP) area in the week of the 22nd. There were 612 deaths registered that were related to Coronavirus over the same period – accounting for 45.3% of total deaths. The WMCA (3 LEP) area accounted for 72.5% of the 844 Coronavirus related deaths registered in the West Midlands Region.
- In the West Midlands, 75% of adults reported they were very or somewhat worried about the effect COVID-19 was having on their life, slightly below the Great Britain average of 76%.
- Average personal well-being scores for life satisfaction was 6.4 in the West Midlands (6.5 GB), ‘worthwhile’ was 6.9 in the West Midlands (7.0 GB), ‘happiness’ was 6.4 for West Midlands adults (matching GB) and ‘anxious’ was recorded at 4.6 for West Midlands adults (4.3 GB). 42% of adults in the West Midlands reported high levels of anxiety (37% for GB).
- As we near a second month of renewed lockdown measures, a number of business across the region have raised the subject of mental health among their workforce, particularly with those families trying to undertake home learning to children, often whilst they are suffering from positive COVID tests. A number of businesses are offering free COVID testing and in some cases are discussing counselling and other services to their staff, with one example of this involving dealing with the loss of colleagues due to the disease.
Brexit and Trade Impacts
- MakeUK highlights key issues of even those companies deeming themselves ready for changes to trade, still having faced disruption. Supply chain disruption was felt immediately. New rules for products including rules of origin, conformity and product markings are a whole new world for many. The Northern Ireland protocol brings new checks but not all companies have taken the necessary steps. Manufacturers are regularly sending employees to the EU for business, but again these rules will change.
- 6% of West Midlands businesses reported that the main reason for the difference in stock levels was due to COVID-19. 26.4% of West Midlands businesses reported the main reason to be COVID-19 and the end of the EU transition period. 23.3% of West Midlands businesses reported just the end of the EU transition period as the main reason and 5.8% of West Midlands businesses reported the main reason as other.
- 0% of responding West Midlands businesses reported they were stockpiling goods or material from UK suppliers, 9.2% were stockpiling from EU Suppliers and 3.2% were stockpiling from non-EU suppliers. 77.8% of West Midlands businesses reported not stockpiling any goods or materials. Of the West Midlands businesses that reported they had stockpiled goods or materials, the highest percentage was in manufacturing parts at 32.7%.
- Rolling data on trading shows 90.3% of responding West Midlands businesses were trading between 11th to 24th 9.2% of businesses had temporarily closed or temporarily paused trading and less than 1% of businesses had permanently ceased trading.
- 6% of West Midlands businesses reported prices did not change any more than normal, 13.1% reported prices increased more than normal and 6.6% of West Midlands businesses reported some prices increased and some prices decreased.
Ongoing issues are being reported by some businesses in the West Midlands. Key points include:
- Additional costs associated with freight. Freight agencies continue to be employed by those with little knowledge or resource to conduct this activity themselves.
- Port Stacking. Businesses predicting, or certainly posing the question, that the real impact of port stacking will not be felt until the economy returns to normal levels.
- DIT queries remain around the movement of people and with the current travel restrictions, particularly within the service sector. Other issues and concerns are around the sourcing of international skills and delays with issuing visas for prospective new employees.
- There is confusion over the duties payable.
- There are instances of EU firms cancelling orders from the UK due to the extra bureaucracy and looking to source products from the EU instead.
- Costs of having to set up a subsidiary in the EU affecting profitability.
- Delays in transport times for exports and an increase in transit time for inbound goods.
- Large increases in related admin and disruption.
- Many enquiries from companies asking about European carnets (taking goods out temporarily).
- Confusion over rules origin, particularly businesses confused about whether Certificate of Origin covers goods of EU origin.
Download and view a copy of the West Midlands Weekly Economic Monitor.
The weekly monitor brings together data and intelligence from the WM REDI partnership into one single source which can be shared and utilised in planning and responding to the challenge of the virus. This is a rapid review of the issues. It is not intended to be a comprehensive assessment but rather a practical report which places emphasis on emerging issues and the best data and intelligence we have to date.
The monitor is feeding into the regional recovery planning that can help the regional economy bounce back and quickly move forward once lockdown restrictions start to be lifted.
The work is being endorsed by political and business leaders a task force of experts are being set up through WM REDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.
City-REDI / WM REDI has developed a resource page with all of our analysis of the impact of Coronavirus (COVID-19) on the West Midlands and the UK. It includes previous editions of the West Midlands Weekly Economic Monitor, blogs and research on the economic and social impact of COVID-19. You can view that here.
This blog was written by Rebecca Riley, Business Development Director, City-REDI / WM REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.